EX-10.4






Exhibit 10.4




Sino-Foreign Equity Joint Venture Contract




CHAPTER I GENERAL PROVISIONS



China Hydroelectric Corporation successfully acquired fifty percent (50%) of the equity interests
of Yunhe County Shapulong Hydropower Generation Co., Ltd. held by Yunhe County Yunhe State Assets
Management Co., Ltd. at Zhejiang Property & Stock Exchange on October 12, 2007. In accordance with
the Law of the People’s Republic of China on Sino-Foreign Equity Joint Ventures, the Implementation
Regulations of the Law of the People’s Republic of China on Sino-Foreign Equity Joint Ventures and
other relevant laws and regulations of the People’s Republic of China (the “PRC”), China
Hydroelectric Corporation, Zhejiang Guangning Hydroelectric Development Co., Ltd. and Zhejiang
Province Water Resources and Hydroelectric Investment Group Co., Ltd., after friendly consultations
and on the principles of equality and mutual benefits, have agreed to change the legal form of
Yunhe County Shapulong Hydropower Generation Co., Ltd. into a Sino–foreign equity joint venture.
The Parties hereto have entered into this Contract in Yunhe County, Lishui City, Zhejiang Province
on November 6, 2007.




CHAPTER II PARTIES TO THIS CONTRACT




	 	 	 
	Article 1

	 	Parties to this Contract are as follows:






	 	 	 
	Foreign Party:

	 	China Hydroelectric Corporation (hereinafter referred to as “Party A”)
	 
	 	 
	 

	 	Registered Address: 558 Lime Rock Road, Lime Rock, Connecticut 06039
	 
	 	 
	 

	 	Incorporation Place: Cayman Islands
	 
	 	 
	 

	 	Legal Representative: John D. Kuhns
	 
	 	 
	 

	 	Position: Chairman
	 
	 	 
	 

	 	Nationality: United States of America






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	Chinese Parties:

	 	Zhejiang Guangning Hydroelectric Development Co., Ltd.
(hereinafter referred to as “Party B”)
	 
	 	 
	 

	 	Registered Address: No. 157-1, Liqing Road, Lishui City, China
	 
	 	 
	 

	 	Legal Representative: Lu Ning
	 
	 	 
	 

	 	Position: Chairman
	 
	 	 
	 

	 	Nationality: China
	 
	 	 
	 

	 	Zhejiang Water Resources and Hydroelectric Investment
Group Co., Ltd. (hereinafter referred to as “Party C”)
	 
	 	 
	 

	 	Registered Address: No. 195, Kaixuan Road, Hangzhou City, China
	 
	 	 
	 

	 	Legal Representative: Ling Shi Shan
	 
	 	 
	 

	 	Position: General Manager
	 
	 	 
	 

	 	Nationality: China






CHAPTER III THE JOINT VENTURE COMPANY




	 	 	 
	Article 2

	 	In accordance with the Law of the PRC on Sino-Foreign
Equity Joint Ventures and other relevant laws and
regulations of the PRC, Party A, Party B and Party C have
agreed to change the legal form of Yunhe County Shapulong
Hydropower Generation Co., Ltd. (hereinafter referred to
as the “JV Company”) into a Sino-foreign equity joint
venture.
	 
	 	 
	Article 3

	 	The name of the JV Company is “” in Chinese
and “Yunhe County Shapulong Hydropower Generation Co.,
Ltd.” in English.
	 
	 	 
	 

	 	The legal address of the JV Company is
No. 42, Xinhua Street, Yunhe Town, Yunhe County, Lishui
City, Zhejiang Province.
	 
	 	 
	Article 4

	 	The JV Company shall be a Chinese legal person and all
activities of the JV Company shall be complied with the
laws, decrees and relevant regulations of the PRC.






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	Article 5

	 	The legal form of the JV Company shall be a limited liability company. The
liability of Party A, Party B and Party C for the debts and obligations of the JV
Company shall be limited to their respective capital contributions to the
registered capital. The profits, risks and losses of the JV Company shall be
shared and borne by the Parties in proportion to their capital contributions to
the registered capital.






CHAPTER IV PURPOSE, SCOPE AND SCALE OF PRODUCTION AND OPERATION




	 	 	 
	Article 6

	 	The purpose of Party A, Party B and Party C in establishing the JV Company shall
be: to enhance economic co-operation and technical exchanges, to reinforce the
operation and management of the JV Company by adopting advanced and scientific
management methods, so as to improve economic results and ensure satisfactory
economic benefits for each investor.
	 
	 	 
	Article 7

	 	The business scope of the JV Company shall be: hydropower generation and operation.
	 
	 	 
	Article 8

	 	The production scale of the JV Company shall be as follows: 
	 
	 

	 	Production Scale: total installed capacity of 25,000 KW (2X12,500 KW).






CHAPTER V TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL




	 	 	 
	Article 9

	 	The total amount of investment of the JV Company shall be RMB 70,000,000.
	 
	 	 
	Article 10

	 	Party A shall procure the equity interests by acquiring 50% of the state-owned






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	 	equity interests of Yunhe County Shapulong Hydropower Generation Co., Ltd. held
by Yunhe County Yunhe State Assets Management Co., Ltd.
	 
	 	 
	Article 11

	 	The total amount of capital contributions paid by Party A, Party B and Party C is
RMB35,340,000, which shall be the registered capital of the JV Company. Among
which, Party A shall contribute in US Dollars equivalent to RMB17,670,000,
representing 50% of the registered capital of the JV Company, Party B shall
contribute in the amount of RMB13,075,800, representing 37% of the registered
capital of the JV Company, and Party C shall contribute in the amount of
RMB4,594,200, representing 13% of the registered capital of the JV Company.
	 
	 	 
	Article 12

	 	All Parties shall pay their respective capital contributions in cash and the
capital contribution from Party A shall be paid up within 90 days from the
issuance date of the business license of the JV Company.
	 
	 	 
	Article 13

	 	In the event that Party A, Party B or Party C intends to transfer its capital
contributions to the JV Company, in whole or partially, to any third party, the
consent from other Parties and approval from the approval authorities shall be
obtained.
	 
	 	 
	 

	 	Where a Party intends to transfer all or part of its capital
contributions, other Parties shall have the pre-emptive right to purchase such
capital contributions.






CHAPTER VI RESPONSIBILITIES OF THE PARTIES




	 	 	 
	Article 14

	 	Party A, Party B and Party C shall jointly accomplish the following obligations:
	 
	 

	 	To change the legal form from a domestic-funded enterprise into a Sino-foreign
equity joint venture, to apply for approvals and registrations and to procure the
business license etc., from relevant PRC governmental authorities in charge. To
handle other matters authorized by the JV Company.






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CHAPTER VII SALES OF PRODUCTS




	 	 	 
	Article 15

	 	All electric products of the JV Company shall be sold within the domestic
market of the PRC without any export.






CHAPTER VIII BOARD OF DIRECTORS




	 	 	 
	Article 16

	 	The registration date of the JV Company shall be deemed as the
establishment date of the Board of Directors of the JV Company.
	 
	 	 
	Article 17

	 	The Board of Directors of the JV Company shall comprise six (6) directors,
among whom, three (3) directors shall be appointed by Party A, two (2)
directors shall be appointed by Party B, and one (1) director shall be
appointed by Party C. The Chairman of the Board of Directors shall be
appointed by Party A. The Chairman and directors shall serve for a term of
three (3) years and may serve consecutive terms if reappointed by the
Party that originally appointed him/her.
	 
	 	 
	Article 18

	 	The Board of Directors shall be the highest authority of the JV Company
and shall have the power to determine all major decisions pertaining to
the JV Company. The ordinary resolution of the Board of Directors shall
require the approval of more than two thirds of all directors of the Board
of Directors. The unanimous approval of all six (6) directors shall be
required for any of the following matters:
	 
	 	 
	 

	 	1) any amendment to the articles of association of the JV Company;
	 
	 	 
	 

	 	2) the termination or dissolution of the JV Company;
	 
	 	 
	 

	 	3) any increase or decrease of the JV Company’s registered capital;
	 
	 	 
	 

	 	4) the merger or spin-off of the JV Company;
	 
	 	 
	 

	 	5) any external investment by the JV Company;
	 
	 	 
	 

	 	6) any external security provided by the JV Company (excluding the security






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	 	     provided for the debts of the JV Company).
	 
	 	 
	 

	 	The Board of Directors shall adopt a resolution within three (3) days
after the meeting of the Board of Directors has been held. Any resolution
of the Board of Directors shall not prejudice any legal rights or
interests of the Parties.
	 
	 	 
	Article 19

	 	The Chairman of the Board of Directors shall serve as the legal
representative of the JV Company. In the event that the Chairman of the
Board of Directors or his/her authorized representative is unable to
perform the obligations for any reason, he/she may temporarily authorize
other directors to act as representative.
	 
	 	 
	Article 20

	 	The meeting of the Board of Directors shall be convened at least once each
year, which shall be convened and presided over by the Chairman of the
Board of Directors. Being proposed by more than one third of the
directors, the Chairman of the Board of Directors may convene an interim
meeting. The meeting minutes shall be kept for record.






CHAPTER IX MANAGEMENT ORGANIZATION




	 	 	 
	Article 21

	 	The JV Company shall establish a management organization, which shall be
in charge of the day-to-day operation and management of the JV Company.
The management organization shall have one (1) General Manager and one (1)
Deputy General Manager. General Manager and Deputy General Manager shall
be determined and appointed by the Board of Directors, and the office term
shall be determined by the Board of Directors.
	 
	 	 
	Article 22

	 	General Manager shall exercise his/her powers and take corresponding
responsibilities in accordance with the articles of association of the JV
Company. The Board of Directors shall carry out budget and authorization
management over the management personnel of the JV Company.






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	Article 23

	 	In case General Manager or Deputy General Manager commits jobbery or
serious dereliction of duty, the Board of Directors may remove him/her at
any time by passing a resolution.






CHAPTER X PROCUREMENT OF EQUIPMENTS




	 	 	 
	Article 24

	 	Under the same terms and conditions, the raw materials, fuels, parts and
components, transportation vehicles and office supplies, etc. required by
the JV Company shall be firstly purchased within China.
	 
	 	 
	Article 25

	 	In case the JV Company entrusts Party A to purchase equipments from the
overseas market, the representatives from other Parties shall be invited
to attend.






CHAPTER XI TECHNOLOGICAL UPGRADING AND INFRASTRUCTURE CONSTRUCTION




	 	 	 
	Article 26

	 	In case the JV Company intends to carry out the technological upgrading,
an Infrastructure Construction Office shall be established under the
leadership of the Board of Directors during the construction period. The
Infrastructure Construction Office shall comprise three (3) members,
including one (1) Director-General and two (2) Deputy Director-General,
all of whom shall be determined and appointed by the Board of Directors.
	 
	 	 
	Article 27

	 	The Infrastructure Construction Office shall be responsible for examining
the project design, drafting the project construction contracting
agreements, organizing the procurement and acceptance of relevant
equipments and materials, etc., formulating the overall schedule for the
project construction, working out the payment schedule, controlling the
financial expenditures and final accounts of the project, formulating
relevant management measures, and keeping and tidying up the documents,
drawings, archives and materials during the construction process, etc.






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	Article 28

	 	Party A and Party B shall designate several technicians to form
a technician team, which, under the leadership of the
Infrastructure Construction Office, shall be responsible for
the examination, supervision, inspection and acceptance, etc.
of the project design, project quality, equipments and
materials and introduction of technologies.
	 
	 	 
	Article 29

	 	Subject to the consent of the Parties, the organizations,
remunerations and expenditure of the staff of the
Infrastructure Construction Office shall be included in the
project budget.
	 
	 	 
	Article 30

	 	Subject to the approval of the Board of Directors, the
Infrastructure Construction Office shall be dissolved after the
project construction has been completed and the relevant
delivery has been accomplished.






CHAPTER XII LABOUR MANAGEMENT




	 	 	 
	Article 31

	 	In accordance with the Provisions on Labor Management of
Sino-Foreign Equity Joint Ventures of the PRC and its
implementation measures and subject to the scheme formulated by
the Board of Directors, matters relating to the recruitment,
employment, dismissal, resignation, wages, labor insurances,
welfare and rewards and punishment of the employees of the JV
Company shall be stipulated in the labor contracts entered into
by and between the JV Company and its Trade Union or the JV
Company and respective individual employees. After the labor
contracts have been concluded, the JV Company shall file those
contracts with the local labor administration authority for
record.
	 
	 	 
	Article 32

	 	The remunerations of all employees (including senior officers)
of the JV Company shall be determined on the basis of the local
economic and social






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	 	development level. The Board of Directors shall have the right
to determine the standards for social insurances, welfare and
traveling expenses, etc. of employees of the JV Company.
	 
	 	 
	Article 33

	 	The salaries and other justified income of foreign employees of
the JV Company may be remitted abroad in accordance with the
regulations on foreign exchange control after payment of
individual income tax pursuant to PRC tax laws.






CHAPTER XIII TAXATION, FINANCIAL AFFAIRS, AUDITING AND PROFITS




	 	 	 
	Article 34

	 	The JV Company shall establish its financial and accounting
system in accordance with relevant laws, administrative
regulations and rules issued by the Ministry of Finance of the
State Council.
	 
	 	 
	 

	 	The JV Company shall prepare the financial and
accounting reports at the end of each fiscal year and engage an
accounting firm to do auditing in accordance with law.
	 
	 	 
	 

	 	The
financial and accounting reports shall be prepared in
accordance with laws, administration regulations and rules
issued by the Ministry of Finance of the State Council.
	 
	 	 
	Article 35

	 	When the JV Company distributes its after-tax profits of
current year, it shall allocate 10% of the profits to the
statutory reserve fund of the JV Company. The JV Company may
cease to allocate such fund when the accumulated amount of the
balance of the statutory reserve fund has reached 50% of the
registered capital of the JV Company.
	 
	 	 
	 

	 	In the event that the
statutory reserve fund of the JV Company is not sufficient to
make up the losses of the JV Company suffered in the previous
years, the current year’s profits shall be firstly used to make
up the losses prior to the allocation of the statutory reserve
fund pursuant to the provisions of the preceding paragraph.






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	 	After the allocation of the statutory reserve fund from the
after-tax profits, the JV Company may, upon the resolution of
the Board of Directors, allocate optional reserve fund from the
after-tax profits.
	 
	 	 
	 

	 	After the losses have been made up and the
reserve funds have been allocated, the remaining profits of the
JV Company shall be distributed in proportion to the respective
capital contributions to the registered capital of the JV
Company.
	 
	 	 
	 

	 	The reserve funds of the JV Company shall be used to
make up losses, expand the production and business scale or
increase the registered capital of the JV Company. However, the
capital reserve fund shall not be used for making up the losses
of the JV Company.
	 
	 	 
	 

	 	Where the statutory reserve fund is used to
increase the registered capital, the balance of the statutory
reserve fund shall be not less than 25 % of the registered
capital prior to such increase.
	 
	 	 
	Article 36

	 	According to the articles of association of the JV Company, the
engagement or dismissal of the accounting firm carrying out the
auditing of the JV Company shall be determined by the Board of
Directors. When the Board of Directors votes on the dismissal
of the accounting firm, such accounting firm shall be allowed
to state its own opinions.
	 
	 	 
	 

	 	The JV Company shall provide to the
accounting firm with genuine and complete accounting vouchers,
account books, financial and accounting reports and other
accounting materials, and shall not refuse, conceal or make any
false statements.
	 
	 	 
	Article 37

	 	Except for the statutory accounting books, the JV Company shall
not set up any other accounting books.
	 
	 	 
	 

	 	The assets of the JV
Company shall not be deposited under any individual’s account.
	 
	 	 
	Article 38

	 	The fiscal year of the JV Company shall be from January 1 to
December 31 of each calendar year. All accounting vouchers,
receipts, statements and books of the






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	 	JV Company shall be written in Chinese.
	 
	 	 
	Article 39

	 	Within the first three (3) months of each operating year,
General Manager shall organize to prepare for the balance
sheet, profit and loss statement and profit distribution scheme
for the previous year, which shall be submitted to the Board of
Directors for examination. The profits or losses of the JV
Company shall be distributed to the Parties in proportion to
their respective capital contributions to the registered
capital of the JV Company.






CHAPTER XIV BUSINESS DURATION OF THE JV COMPANY




	 	 	 
	Article 40

	 	The business duration of the JV Company shall be thirty (30)
years, commencing from the date on which the business license
of the JV Company is issued. Being proposed by any Party and
approved by more than two thirds of the directors of the Board
of Directors, the JV Company may apply to the Ministry of
Foreign Trade and Economic Cooperation (or its authorized
approval authority) for the extension of the business duration
of the JV Company six (6) months prior to the expiration of the
business duration.






CHAPTER XV DISPOSAL OF ASSETS UPON THE EXPIRATION OF BUSINESS DURATION




	 	 	 
	Article 41

	 	In case of expiration of business duration or early termination
of business duration, liquidation of the JV Company shall be
carried out in accordance with law. After liquidation, the
assets of the JV Company shall be distributed to Party A, Party
B and Party C in proportion to their respective contributions
to the registered capital of the JV Company.









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CHAPTER XVI INSURANCE




	 	 	 
	Article 42

	 	All types of insurances of the JV Company shall be taken out
with insurance companies of China. The insurance types, insured
amount and insurance period, etc. shall be determined by the
Board of Directors of the JV Company in accordance with
relevant regulations of insurance companies of China.






CHAPTER XVII AMENDMENT, MODIFICCATION AND TERMINATION OF THIS CONTRACT




	 	 	 
	Article 43

	 	Any amendment to this Contract and its appendices shall not
come into effect unless such amendment is made in a written
agreement signed by Party A, Party B and Party C and approved
by the approval authority.
	 
	 	 
	Article 44

	 	In the event that this Contract cannot be performed due to an
event of Force Majeure, or the JV Company incurs consecutive
losses and is unlikely to recover, upon the unanimous approval
of the Board of Directors and the approval from the original
approval authority, the business duration of the JV Company can
be terminated and this Contract can be rescinded early.
	 
	 	 
	Article 45

	 	Due to non-performance of obligations under this Contract or
the articles of associations, or material breach of any
provisions of this Contract or the articles of association by
any Party, the JV Company cannot be operated or cannot reach
its business objectives stipulated in this Contract, which
shall be deemed that the breaching Party has severely
terminated this Contract. Except for claiming for compensation
against the defaulting Party, the counterparty shall be
entitled to apply to the original approval authority for the
termination of this Contract in accordance with this Contract.
In the event that all Parties hereto agree to continue the
operation of the JV Company, the defaulting Party shall
compensate the economic losses incurred by the JV Company.









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CHAPTER XVIII LIABILITY FOR BREACH OF CONTRACT





	 	 	 
	Article 46

	 	Where any Party fails to pay its capital contribution within
the time limit and in the amount prescribed in Chapter V
hereof, commencing from the first overdue month, the defaulting
Party shall pay 1% of its capital contribution to the
non-defaulting Party (ies) as liquidated damages for each
overdue month. In the event that the defaulting Party fails to
pay the overdue capital contribution up to three (3) months,
besides requiring the defaulting Party to pay the accumulated
1% of its capital contribution to the non-defaulting Party
(ies) as liquidated damages, the non-defaulting Party shall be
entitled to terminate this Contract in accordance with Article
45 hereof and claim against the defaulting Party for
compensation for the losses.
	 
	 	 
	Article 47

	 	Where this Contract and its appendices cannot be performed due
to any Party’s default, the defaulting Party shall assume the
liabilities for breach of contract; where all Parties are in
breach, on the basis of the actual situation, each Party shall
be liable for breach of contract in proportion to its fault.






CHAPTER XIX FORCE MAJEURE




	 	 	 
	Article 48

	 	Due to the occurrence of Force Majeure events, including
without limitation to earthquakes, typhoons, flood, fire, war
or any other incidents which cannot be foreseen and the
occurrence and results of which cannot be prevented or avoided,
the performance of this Contract is directly influenced or
cannot be performed in accordance with the provisions hereof,
the Party claiming the occurrence of Force Majeure shall
promptly inform the other Party (ies) by telegram, and within
fifteen (15) days thereafter, it shall provide details of the
Force Majeure and supporting documents which are sufficient to
evidence that this Contract cannot be performed, or part of
this Contract cannot be performed, or the performance of this
Contract needs to be postponed. The aforesaid supporting
documents shall be issued by the public notary organization
located at the place






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	 	where the Force Majeure event occurs. On the basis of the
influence of the Force Majeure event on the performance of this
Contract, the Parties shall negotiate with each other to
determine whether to terminate this Contract or to partially
release the Party claiming the occurrence of Force Majeure from
the obligations of performing this Contract, or to postpone the
performance of this Contract.






CHAPTER XX APPLICABLE LAW




	 	 	 
	Article 49

	 	The formation, validity, interpretation and performance of this
Contract, and resolution of any dispute, shall be governed by
the PRC law.






CHAPTER XXI RESOLUTION OF DISPUTES




	 	 	 
	Article 50

	 	Any dispute arising out of or in connection with this Contract
shall firstly be resolved through friendly consultation. In the
event that the dispute cannot be resolved through consultation,
any Party may submit such dispute to China International
Economic and Trade Arbitration Commission for arbitration in
accordance with its then prevailing arbitration rules. The
arbitration place shall be in Shanghai, China.
	 
	 	 
	Article 51

	 	During the arbitration process, this Contract shall be
continued to be performed except for the matters under dispute.






CHAPTER XXII LANGUAGE




	 	 	 
	Article 52

	 	This Contract is written in both the Chinese language and the
English language which shall have the same legal effect. In
case of any inconsistency between the Chinese text and the
English text, the Chinese text shall prevail.









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CHAPTER XXIII EFFECTIVENESS AND MISCELLANEOUS




	 	 	 
	Article 53

	 	This Contract shall be subject to the approval by the Ministry
of Foreign Trade and Economic Cooperation of the PRC (or its
authorized approval authority), and shall come into effect from
the approval date.
	 
	 	 
	Article 54

	 	This Contract was entered into by and among the legal
representatives or authorized representatives of Party A, Party
B and Party C in Yunhe County, Lishui City, Zhejiang Province,
China on November 6, 2007.






(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)




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Signing Page:




Party A: China Hydroelectric Corporation




Authorized Representative: (Signature)




Party B: Zhejiang Guangning Hydroelectric Development Co., Ltd.




Legal Representative or Authorized Representative: (Signature)




Party C: Zhejiang Province Water Resources and Hydroelectric Investment Group Co., Ltd.




Legal Representative or Authorized Representative: (Signature)





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